mm02 warns of revenue queeze

Growth expected 'to slow significantly'

The telecoms regulator's decision earlier this year to force operators in the UK to slash charges for making calls to their mobile networks is starting to hurt.

So says mobile outfit mmO2, which admitted today that service revenue growth is expected "to slow significantly" in the second half of the year as the termination rate cuts imposed by the regulator take effect.

The warning was contained in a statement ahead of the publication of the company's interim results to the end of September, which are due to be announced on November 17.

For the first half of the year, O2 UK is expected to report service revenue growth in the mid-teens on the back of an increase in subscribers and better ARPUs (average revenues per user).

Said chief exec Peter Erskine in a statement: "The strong customer and ARPU growth that we reported across the group in the first quarter was sustained into the second quarter, and our first half results will reflect this."

However, the regulator-imposed cost cutting will have an effect on final figures for the year, he said.

"In the UK, we remain focused on delivering our full-year target of 10 per cent service revenue growth and a 30 per cent EBITDA margin, although we expect the market to become more competitive in the second half,"

In Germany, mmO2 says that it continues to grow market share and that its numbers are stacking ahead of expectations. The mobile operator expects this performance to be "sustained through the second half, despite an increasingly competitive market environment".

By early afternoon shares in mmO2 were up 1.25p (2.14 per cent at 59.75p. ®